Sri Lanka’s key inflation rate falls to 5.9% in Feb

Sri Lanka's food prices rise 3.5 per cent in February from 3.3 per cent in January. PHOTO: REUTERS

Published Thu, Feb 29, 2024 · 06:25 PM

SRI Lanka’s key inflation rate fell to 5.9 per cent in February from 6.4 per cent in January, the statistics department said on Thursday (Feb 29).

The Colombo Consumer Price Index, a leading indicator for broader national prices, tracks inflation in Colombo, Sri Lanka’s biggest city.

Food prices rose 3.5 per cent in February from 3.3 per cent in January, the Department of Census and Statistics said in a statement.

Prices for non-food items rose 7 per cent this month from 7.9 per cent year on year in January.

Despite an increase in Value Added Tax (VAT) from 15 per cent to 18 per cent at the start of the year, as part of efforts to meet government revenue targets set under a US$2.9 billion International Monetary Fund (IMF) bailout, Sri Lanka’s inflation is expected to return to the 5 per cent target set by the central bank, analysts said.

“This is in line with expectations. Inflation numbers are continuing to benefit from a high base effect and we expect March inflation to drop to about 2.6 per cent,” said Dimantha Mathew, head of research, First Capital.

BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

“We project inflation to be between 4 to 7.5 per cent from April to about the end of this year.”

Inflation is likely to benefit from lower energy and possibly fuel prices in the next few months.

Sri Lanka’s power regulator is scheduled to meet on Friday to decide on an 18 per cent reduction in tariffs for households and a downward price adjustment on fuel costs is also expected, analysts added.

Sri Lanka repays US$20 million Iranian oil debt with tea

Sri Lanka’s economy is seeing glimmers of recovery, helped by a US$2.9 billion IMF programme, after it went into freefall in 2022 due to a severe foreign exchange shortage.

Sri Lanka's inflation expected to hit 5% in medium term

Sri Lankan President Ranil Wickremesinghe (C), accompanied by Speaker of the Parliament Mahinda Yapa Abeywardena (L), arrives at the parliament complex for the inauguration of the fifth session of the ninth Parliament in Colombo.

Sri Lanka targets debt restructuring framework in first 6 months of 2024, says President

“Sri Lanka’s reserves have gradually improved and limits will be increased under the guidance of the central bank,” says Cabinet spokesperson Bandula Gunawardane.

Sri Lanka approves lifting some limits on rupee conversion for outward remittances

“We are looking at, within the next 12 to 24 months, somewhere in the region of about US$5 billion worth of foreign currency infusion into the country in terms of projects and also from the sale of some state-owned enterprises,” says Sabry said in an interview.

Sri Lanka eyes US$5 billion in foreign funds after debt restructure

Sri Lanka racked up record high inflation that peaked at 70 per cent in September 2022 after its economy was pummelled by the worst financial crisis in decades, triggered by a plunge in foreign exchange reserves.

The Central Bank of Sri Lanka (CBSL) kept its rates unchanged last month to control inflation after cutting interest rates by 650 basis points since it started an easing cycle in June 2023 to help fuel an economic recovery from recession last year. REUTERS

Sri Lanka Inflation

Share with us your feedback on BT's products and services

Feedback